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Poland

Poland

Cautious optimism for Poland market -- Certificate trading introduced

Wind power generators in Poland can expect around PLN 350-370/MWh (EUR 86-91/MWh) for their electricity and associated renewable energy certificates under the country's amended renewable energy law, reveal initial calculations. The prices should be high enough to drive a substantial market, although market players are only giving the introduction of certificate trading a cautious welcome.

Under the amendment, electricity suppliers must now accumulate renewable energy certificates (RECs) to demonstrate they are sourcing a rising proportion of their sales from clean power generation. Suppliers that fail to accumulate sufficient RECs will be subject to financial penalties.

"The renewable energy certificates trading will certainly be a step forward on what has been achieved so far but whether the legal arrangements are firm enough to give wind developers the security they need to get financing is not yet clear," says Markus Reichel of Inerconsult in Dresden, a Polish-German energy and environment consultancy.

No stability

German project developer WKN, which is currently seeking investors for two permitted Polish wind projects with a combined capacity of 73 MW, feels the same way. It remains to be seen if the trading mechanism rules are "consistently followed through," says the company's Catrin Petersen. She also points out that long term market stability may still be missing. Although targets are set to 2014 and the amendment takes force in October, it will only run for a year before being reviewed, she says.

Poland's requirement for renewables power has been in place since 2003 and the annual targets were renewed earlier this year. The target for 2005 is 3.1%, rising to 3.5% in 2006, 4.3% in 2007, 5.4% in 2008, and 7% in 2009. For 2012-2014 it is currently 9%. The law also requires suppliers to buy all the electricity generated from renewable energy sources in their area at a minimum price equal to the average electricity sales price in Poland for the previous calendar year.

Grzegorz Wisniewski from EC Baltic Renewable Energy Centre (ECBREC), situated in Warsaw, cautions against early optimism on green certificate trading. But ECBREC believes the law will provide renewable energy generators with a fairly stable price for their physical electricity production of PLN 110-120/MWh (EUR 27-29/MWh), plus around PLN 240/MWh (EUR 59/MWh) for each renewable energy certificate.

Penalty doubts

A penalty system for not acquiring sufficient certificates, or for failing to buy renewables generation, is now in place. Electricity suppliers have a three month period of grace at the end of each calendar year in which to produce the required number of RECs or submit to penalties. For each certificate shortfall, a supplier will be charged 1.15 times the average price for certificates in the previous year -- a penalty that will rise if it is not paid, or certificates are not produced.

For failing to buy all renewable power on offer at the average electricity sales price, a similar economic punishment is meted out to suppliers. The penalty is made up of the average electricity sales price in the previous year multiplied by the difference between the volume of green electricity generated in the defaulting supplier's network area and the volume it purchased.

Reichel has doubts about whether the penalty system will work. Over the four years the renewable targets have been in place, penalties have not been stringently imposed and the system has been subject to change, he says. Reichel is sceptical about whether the introduction of certificates will improve the willingness of electricity suppliers to comply with the law.

The new amendment also introduces a requirement that all companies owning more than 5 MW of green power capacity pay towards a green certificates register which will track certificates of origin and administer licences for generation from renewable energy sources.

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